CAIB 1 CHAPTER 1 QUESTIONS AND ANSWERS RATED A+

CAIB 1 CHAPTER 1 QUESTIONS AND ANSWERS RATED A+ Identify 4 possible options to deal with Risk , describe each Control the Risk ( loss control measures) Avoid the Risk ( rent Rather than buy ) Retain the risk ( self insurance or share risk through deductibles) Transfer the Risk ( purchase insurance ) Out of the 4 means of managing risk, which is the most practical? Transfer of Risk Identify the 5 elements required in all types of contracts Agreement , Consideration , Legality of Object , Legal Capacity( are they old enough , sane , sober?) Genuine Intention ) Indicate whether the following are permitted to enter a contract A- Individuals B - Trade Names C - Corporations A- Individuals if they are competent to do so B - no legal status and aren't entitled to contract C- same right to contract as individuals (rights set out in charter) Identify the 3 additional Elements that aren't required of other types of contracts 1 - Insurable interest 2 - Utmost Good Faith 3 - Indemnity State the 2 Duties owed by brokers to A - Insureds B - Insurers A - Careful and prompt attention to instructions, expert advice and competitive pricing of products B - Collection of premiums and passing on relevant info obtained from the client What point in time is used by insurers to measure the amount of indemnity to be paid by the policy? Indemnity is measured by the value of the insured property as it existed immediately prior to the loss Insurance binders can be either oral or written, where does the broker obtain authority to bind an insurer on a risk? An insurers agency agreement What advice would you give to a broker who has provided an oral binder to a risk? Oral binders should be confirmed immediately in writing Explain what might happen when brokers exceed their binding authority given to them by an insurer The Broker / Brokerage may face an errors and omissions claim, possibly responsible for the loss What are 3 ways brokers might exceed Authority? 1 - may bind a property risk for higher amounts than set out in the contract 2 - May bind a risk which is on the decline list in the agency contract 3 - May bind a liability risk for higher limits than set out in agency contract Identify the 3 criteria used to determine the indemnity to be paid under most property insurance policies Actual cash value of the item at the time of the loss -interest of the insured in the property